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ESG 2019 Annual Report

Company

Meaningful Progress
in Our Strategic Objectives

SJI continues to focus on driving
shareholder value through investments
that expand and modernize our
utility infrastructure.

A Letter From Our CEO

In 2019, we emerged a better, stronger SJI.

We remained committed to building a sustainable business, prioritizing environmental, social and governance performance that reinforces the foundation needed for SJI to thrive – now and in the future.

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We are proud of our achievements in 2019. From completing the integration of our gas utilities to executing several important long-term regulatory initiatives and others highlighted in this report, we continued to make meaningful progress towards the goals of our strategic plan.

As we navigate 2020, we have found ourselves confronting new challenges including the global COVID-19 pandemic and the civil unrest in response to racial and social injustice across our country. I am proud of how our organization has responded and how as One SJI we have stood together, united and strong.

Across SJI, we have actively responded to the COVID-19 Pandemic in accordance with guidance from the CDC, the State and our regulators. In March, all office-based employees began working remotely, including our dispatch and customer service teams. At the onset of the pandemic, our field operations teams immediately began to prioritize essential work and were equipped with proper PPE.

As part of our response, we have remained committed to keeping all of our stakeholders safe and informed through everything from shareholder outreach to timely customer and employee communications and more. We also made significant contributions to support the New Jersey Pandemic Relief Fund, the AtlantiCare Foundation, Trinitas Regional Medical Center and the Community FoodBank of New Jersey Southern Branch to directly support those in need across our communities.

I continue to be extremely proud of our employees and the resiliency they have shown throughout this unprecedented crisis. Through their selflessness and dedication, we have been able to deliver on our commitment to provide safe, reliable, affordable natural gas service without interruption while protecting the collective health and safety of our customers, employees, families and the communities we serve.

As we continue to navigate the pandemic, we remain focused on identifying ways that we can support our communities and employees, while developing a return to office protocol that puts safety first.

In the midst of our response, we were struck by the senseless killings of George Floyd and Ahmaud Arbery that brought to light the racial and social injustice that continues to exist around us and caused national civil unrest. As an organization, we are firm and clear on where we stand in response: this injustice is painful and has no place in our society or SJI.

At SJI, respect, inclusion and acceptance are central to our values and core to who we are. For that reason, we quickly informed our employees and other stakeholders of our position on this issue and the resources we have available to support them through this already difficult time, now made more challenging.

Across our organization we are working to take meaningful actions regarding race relations to address the evident inequities in our communities and to best serve all our stakeholders. As One SJI, we stand together committed to creating a better, more tolerant world within our organization and the communities where we are proud to live and work.

No matter what we face, our mission endures. We’re committed to providing safe, reliable, affordable energy, ensuring the safety of our employees, customers and the communities we serve, while also delivering value to our shareholders and being stewards of the environment. We are unwavering in our mission, and our focus on sustainability helps us maintain this commitment to our more than 700,000 customers.

In this, our 11th report, we continue to highlight results that enhance the sustainability of our company, environment and community. We’ve also continued to enhance the document, preparing the appendix in accordance with the American Gas Association Voluntary Sustainability Metrics reporting guidelines to highlight our commitment to the environmental, social and governance priorities that matter most to our investors and other stakeholders. Looking ahead, we will continue to expand our metrics to meet the changing, dynamic needs of our stakeholders.

As we continue to transform our business for the future, we promise to maintain our commitment to sustainability, reinforcing the foundation for a sustainable business and energy future for our region.

Signature

Michael J. Renna
President & CEO

 

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SJI CEO

SJI at a Glance

Headquartered in Folsom, New Jersey, SJI is an energy services holding company that delivers energy services to its customers through three primary subsidiaries.

SJI Utilities

700,000 customers served across three utilities

The holding company for our regulated natural gas utilities, SJI Utilities, serves more than 700,000 customers across three utilities, including South Jersey Gas and Elizabethtown Gas in New Jersey and Elkton Gas in Maryland.

Non-Utility & Midstream

Continued work on the PennEast Pipeline project

Our non-utility businesses, South Jersey Energy Services and South Jersey Resources Group within South Jersey Energy Solutions, prioritize wholesale commodity marketing, asset optimization and fuel supply management. SJI Midstream houses the company’s interest in the PennEast Pipeline project.

For information regarding financial performance,
please visit the Investors section of our website.

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Governance, Shareholder Engagement & Risk Management

SJI is governed by a 10 member Board of Directors, as of July 2020, nine of whom are independent.

Our Board of Directors, elected by the shareholders, is the company’s ultimate decision-making entity, except matters reserved for shareholder consideration. Three of our 10 members, as of July 2020, of the Board of Directors are female. We are proud of this 30% female representation on our Board and the significant, positive role diversity plays in our organization.

To support the creation of this report and the company’s other corporate sustainability efforts, the Board of Directors reconstituted the former Corporate Responsibility Committee of the Board, renamed it the Environmental, Social and Governance Committee and revised the responsibilities of the committee to ensure oversight of key initiatives such as Human Capital Management and Climate. The Chair of the ESG Board Committee provides a quarterly report to the full Board regarding ESG initiatives. Also, in 2018 the Board of Directors established the internal Environmental, Social and Governance (ESG) management Committee that reports to the Board ESG Committee at least quarterly.

The ESG Management Committee is responsible for the development and implementation of the company’s key sustainability strategies, initiatives and policies. This includes management of SJI’s commitment to safety, environmental, health, human rights, employee relations, governance and community support strategies. We welcome feedback on this report and our programs, as well as our environmental, social and governance metrics. Please submit comments to corpcommunications@sjindustries.com.

Board of Directors:

  • Michael J. Renna (President & CEO, SJI)
  • Joseph M. Rigby (Chairman)
  • Sarah M. Barpoulis

*as of July 2020
  • Keith S. Campbell
  • Victor A. Fortkiewicz
  • Sheila Hartnett-Devlin
  • Sunita Holzer
  • G. Edison Holland, Jr.
  • Kevin O’Dowd
  • Frank L. Sims

Board Committees:

  • Audit Committee
  • Compensation Committee
  • Environmental, Social and Governance Committee
  • Executive Committee
  • Strategy & Finance Committee
  • Nominating & Governance Committee

3 of 10

members of the Board are female, as of July 2020

3 of 10 members of the Board are female, as of July 2020

Members of SJI management and Board, periodically meet with our shareholders to discuss business topics, seek feedback on our performance, and address other matters such as executive compensation. A key objective of the 2019 outreach efforts was to listen to our shareholders, better understand their perspectives on our executive compensation program and obtain any recommendations for strengthening our approach. To achieve this, we reached out to approximately 35 of our largest shareholders, aggregating approximately 66% of our outstanding shares. Members of the Board of Directors, including the Chairman of the Board and the Chairman of the Compensation Committee, met with nine of our ten top shareholders.  As a result of our shareholder outreach efforts, we received a high level of support for our 2020 say-on-pay proposal (approximately 96%).  We will continue to engage with our shareholders to foster dialogue around the issues that are important and of value to both SJI and our investors.

To strategically manage risks to SJI, the Risk Management Team established the following Enterprise Risk Management (ERM) process utilizing the Committee of Sponsoring Organization (COSO) framework:

  • Conduct annual one-on-one-meetings with business area leads to identify and assess risks for their likelihood and criticality; including Environmental (specifically climate-related risks), Social, and Governance (ESG) risks.
  • Obtain risk assessment scores for short, medium, and long-term risks to determine materiality.
  • Create and obtain an understanding of the controls that have been established to mitigate significant risks.
  • Evaluate the speed of onset or velocity.  The time that elapses between the event and the point the company is affected.
  • Communicate material risks to the Risk Management Committee by distributing a monthly Risk Dashboard, Key Risk Indicators & Emerging & Strategic Risks document and a PowerBI ERM Dashboard.
  • Communicate material ESG related risks at the ESG Management Committee meetings bi-annually and at the ESG Board Committee meetings as needed.

Our risk assessment includes integrating Environmental, Social, and Governance (ESG) related risks into the ERM Process. This integration will provide consistent evaluations and common language throughout the risk assessment process. Data, metrics, and controls are then accurately and timely communicated to the Risk Management Committee, the ESG Management Committee, and the ESG Board Committee. This comprehensive approach creates resiliency and sustainability and contributes to the SJI’s mission to provide safe, reliable, and affordable energy services.